ACA: Employer-Shared Responsibility Requirements

DEANS, DIRECTORS, DEPARTMENT CHAIRS, and ADMINISTRATIVE OFFICERS

Re: ACA: Employer-Shared Responsibility Requirements

This memorandum highlights important changes to eligibility for employee medical insurance benefits as an outcome of the Affordable Care Act (ACA). Since passage of the ACA in 2010, the law has had a significant impact on the University of California (UC) health programs (for example, requiring coverage of dependent children up to age 26, free preventive care, added fees and taxes). The next steps in implementing the ACA will affect eligibility for benefits coverage starting in 2016.

The ACA’s Employer-Shared Responsibility provisions require that large employers such as the University offer medical insurance to substantially all full-time employees and their dependents. For the 2015 plan year, UC has complied with the ACA’s transitional requirement to offer medical insurance to 70% of its full-time employees. (Full-time is defined by the ACA as employees who work, on average, 30 or more hours per week.)

For the 2016 plan year, UC is required to offer medical insurance to substantially all of its full-time employees using the new definition noted above. This will require UC to change benefits eligibility policies and offer coverage to certain categories of employees currently ineligible for medical coverage. Specifically, this change will affect per diem employees, student employees, and those paid solely by agreement — if they work 30 hours on average per week during the applicable “measurement period.”

If UC were to fail to offer medical insurance to its full-time employees, it would be subject to significant penalties (up to $260 million annually), so it is essential that the University comply with the law’s requirements.

The ACA requires only that full-time employees be offered coverage; it does not require that they enroll in the plan. Additionally, the law requires only that the offer of coverage meet specific minimum requirements; the Core Benefits Package, which is UC’s lowest-cost benefits package, meets these requirements.

Although there are about 70,000 employees (mostly student employees) in the University’s population system-wide who have been ineligible for coverage under our policies, we estimate that only around 5,000 of these will qualify for the offer to enroll in the Core Benefits Package. Additionally, because the ACA began assessing tax penalties on individuals who were not insured in 2014, it may be that many of these UC employees are already insured from another source and will likely not enroll in UC’s health plan.

While these changes will take effect on January 1, 2016, the determination of full-time status is based on a calculation of hours worked during a 12-month “look-back” measurement period which started in November 2014. Consequently, employees in the ineligible categories may qualify for UC insurance in 2016, based on their 2015 employment history. The retrospective calculation and determination of eligibility will occur annually and will be administered automatically in the payroll system. These changes will be communicated to employees during open enrollment.

Because these changes may potentially impact workforce decisions and campus/departmental (employer) costs, we wanted to ensure that you were informed. The UCOP HR/Benefits organization is actively involved in implementing these provisions and is working closely with Academic Personnel, Payroll, and Human Resources across the system.